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TMI Blog2016 (5) TMI 981X X X X Extracts X X X X X X X X Extracts X X X X ..... in question is likely to be concealed, transferred or dealt with in a manner, which may result in frustrating the proceedings relating to confiscation of the said proceeds of crime, there is no reference to any fact or material in the impugned order which could lead to this inference. A mere mechanical recording that the property is likely to be concealed, transferred or dealt with would not meet the requirements of Section 5(1) of the Act. Consequently, the impugned order is likely to be set aside. In view of the above, the petition is allowed and the impugned order is set aside. The writ petition alongwith pending application stand disposed of. The parties are left to bear their own costs. - W.P.(C) 1925/2014 & CM No.4017/2014 - - - Dated:- 25-1-2016 - MR VIBHU BAKHRU J. For the Appellant: Mr Shishir Mathur with Mr Kunal Bahri. For the Respondent: Mr Arun Bhardwaj, CGSC for UOI with Mr Abhishek Pundir. JUDGMENT VIBHU BAKHRU, J 1. The petitioner has filed the present writ petition seeking quashing of the provisional attachment order dated 24.01.2014 (hereafter impugned order ) passed by the Deputy Director, Directorate of Enforcement under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost of the commodity and, thereby, caused wrongful loss to NAFED and wrongful gain to themselves. 2.4 On 10.02.2005, MIL through its director - Mr M.K. Agarwal issued cheques for an amount aggregating to ₹ 1.5 crores in favour of its two holding companies namely, M/s Duoroyale Enterprises Ltd. and M/s Sri Radhey Trading Pvt. Ltd. Subsequently, both the said companies issued two cheques each amounting to ₹ 75 lacs in favour of M/s Mahanivesh Oils Foods Pvt. Ltd., the petitioner company, where Smt. Alka Rajvansh - wife of Mr Homi Rajvansh was a Director. 2.5 On 16.02.2005 and 17.02.2005, M/s Mahanivesh Oils and Foods Pvt. Ltd., issued two cheques of ₹ 1,32,00,00/- and ₹ 10,81,000/- respectively in favour of M/s Uppal Agencies Pvt. Ltd. for purchase of the ground floor and basement of the property situated at E-14/3, Vasant Vihar, New Delhi (hereafter the said property ). 2.6 It is alleged that Smt. Alka Rajvansh used the funds received from M/s Duoroyale Enterprises Ltd. and M/s Sri Radhey Trading Pvt Ltd. for purchasing the above-mentioned property pursuant to a sale deed dated 18.03.2005 executed by Shri B.K. Uppal in favour of the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cused is likely to conceal, transfer or deal with the proceeds of crime in a manner which may result in frustrating any proceedings relating to the confiscation of such proceeds of crime. It was contended that no such reason had been provided in the impugned order which provisionally attached the said property after more than 9 years from the date of commission of the alleged offence. 4. The learned counsel for the respondent contended as under:- 4.1 That the impugned order is valid and legal and does not violate Article 20(1) of the Constitution of India. Reliance was placed on Ratan Lal v. State of Punjab: AIR 1965 SC 444. 4.2 That the proceedings of attachment of property are independent of the proceedings for the offence of money-laundering or the scheduled offence. 4.3 That any property, if involved in the money laundering offences, would be liable to attachment and confiscation irrespective of whether it remains in the name of the accused persons or other persons. Section 3 of the Act covers all purchases of moveable and immovable property inducting or integrating proceeds of crime. 4.4 That the date of commission of the scheduled offence is not relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng: The United National Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances called for the confiscation of proceeds of crime related to drugs and further measures for preventing money laundering; in 1989, the Basel Statement of Principles provided the framework of policies and procedures to be adhered to by banks for dealing with the issue of money laundering; at a Summit of seven nations held in Paris in July 1989; Financial Action Task Force (FATF) was established to examine the problems of money laundering; the Political Declaration and Global Programme of Action adopted by the United Nations General Assembly by its Resolution of 23rd February, 1990 called upon the Member States to develop a mechanism to prevent financial institutions from being used for money laundering and further enact legislations for prevention of money laundering; and in a special session of the United Nations held for Countering World Drug Problem Together held in June 1998, a declaration was made with respect to combating and prevention of money laundering. 8. India is also a signatory to some of the aforesaid initiatives. In conformity with the international opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss or activity connected with concealment, possession, acquisition or use of the proceeds of crime. 10. Section 4 provides that the offence of money-laundering shall be punishable with rigorous imprisonment for a term of not less than three years and may extend to seven years and also a fine upto Rupees Five lacs. In cases of proceeds relating to the specified offences, the term can extend upto 10 years. 11. Chapter III of the Act is captioned Attachment, Adjudication and Confiscation . Section 5 of the Act provides for the attachment of property involved in money-laundering and as originally enacted and brought in force with effect from the 01.07.2005 reads as under:- Attachment of Property involved in Money-laundering- (1) Where the Director or any other officer not below the rank of Deputy Director authorized by the Director for the purposes of the section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that; a) any person is in possession of any proceeds of crime; b) such person has been charged of having committed a scheduled offence c) such proceeds of crime are l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person authorised to investigate the offence mentioned in that Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or a similar report or complaint has been made or filed under the corresponding law of any other country: Provided further that, notwithstanding anything contained in clause (b), any property of any person may be attached under this section if the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section has reason to believe (the reasons for such belief to be recorded in writing), on the basis of material in his possession, that if such property involved in moneylaundering is not attached immediately under this Chapter, the non-attachment of the property is likely to frustrate any proceeding under this Act. Section 5(1) of the Act was further amended by Prevention of Money-Laundering (Amendment) Act, 2012. With effect from 03.01.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related to crime, Similarly, Section 18 empowers an authority so authorized on behalf of the Central Government to search any person who is believed to have secreted about his person or has under his possession, ownership or control, any record or proceeds of crime. 13. By virtue of Section 5(5) of the Act, the concerned officer who provisionally attaches any property under Section 5(1) is required to file a complaint stating the facts of such attachment before the Adjudicating Authority. Similarly, Section 17(4) of the Act and Section 18(10) of the Act also require the officer or the authority which has seized any record or property under Section 17 or 18 of the Act to make an application to the Adjudicating Authority. 14. Section 8 of the Act provides for adjudication of the complaint or the applications made under Section 5(5), 17(4) or 18(10) of the Act. Section 8(1) of the Act provides that where on receipt of complaints or applications as the case may be, the Adjudicating Authority has a reason to believe that any person has committed an offence under Section 3 of the Act or is in possession of proceeds of crime, he may serve a notice to such person calling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any person: (a) is in possession of any proceeds of crime; and (b) that such proceeds are likely to be concealed, transferred or dealt with in any manner that may frustrate any proceedings relating to confiscation of such proceeds of crime under this Chapter , he may make an order for provisional attachment of such property . The use of the word such clearly indicates that the reference is to the property mentioned in the preceding portion of Section 5(1) of the Act, that is, proceeds of crime. 19. Section 2(u) of the Act defines proceeds of crime and reads as under:- proceeds of crime means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property; 20. Thus, a conjoint reading of Section 5(1) read with Section 2(u) of the Act clearly indicates that the power to attach is only with respect to the property derived or obtained directly or indirectly by any person as a result of criminal activity relating to a scheduled offence or the value of such property. 21. Thus, plainly, the occurrence of a scheduled offence is the substratal condition for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not established, the basis of the attachment would cease to exist and the question of proceeding further under the Act would not arise. The trial for an offence of money-laundering is also predicated on commission of a scheduled crime and would have to be terminated. It is only in cases where it is found that a scheduled crime has been committed that the question of determining whether an offence of money-laundering is made out would survive. Thus, in cases where the persons accused of a scheduled offence are acquitted, the fundamental premise that any proceeds have been derived or obtained from any activity relating to a scheduled offence by either the persons accused or any other person linked to them would also not hold good and, therefore, any proceeding initiated under the Act would have to be terminated. 24. The next issue to be examined is whether the order of provisional attachment can be issued only in respect of property that is in possession of a person accused of a scheduled offence. In view of the statutory amendment to Section 5 of the Act carried out by virtue of Prevention of Money-Laundering (Amendment) Act, 2012, this controversy does not survive. Prior to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these fall outside the pale of the prohibitions of the Constitution, in particular Article 20(1) . However, I am unable to persuade myself to concur with that view principally for the reason that Section 5 is not a standalone provision; it is in aid of adjudication under Section 8 of the Act and final vesting of the attached property with the Central Government under Section 9 of the Act. The Adjudicating Authority is required to return a finding under Section 8(2) of the Act whether the property attached/seized/frozen is involved in money-laundering. And, by virtue of Section 8(3) of the Act, if the Adjudicating Authority decides that the property is involved in moneylaundering, the attachment, retention and freezing of the property shall continue during the pendency of proceedings relating to the offence under the Act or a corresponding law of any other country with whom India has a bilateral agreement. Thus, it is not possible to envisage provisional attachment of any property in absence of an offence of money-laundering. Consequently, in a given case where the offence of money-laundering cannot be made out as the acts constituting such offence were prior to the Act being broug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the time antecedent to its passing . Thus, with effect from 1st June, 2009 laundering proceeds of crime under Section 420 of the IPC is enacted as an offence of money-laundering punishable under Section 4 of the Act. It is important to note that the punishment under Section 4 of the Act is not for commission of a scheduled offence but for laundering proceeds of a scheduled crime. The fact that the scheduled crime may have been committed prior to the Act coming into force would not render the Act a retrospective statute as only the offence of money-laundering committed after the enforcement of the Act can be proceeded against under the Act. 30. The respondent s contention that the relevant date would be the date of offence of money-laundering and not that of the commission of the scheduled offence is merited and the impugned order cannot be set aside only on the ground that it has been issued in respect of proceeds of a scheduled crime which was allegedly committed prior to 1st July, 2005. 31. The next contention to be considered is whether in the given facts and circumstances, any offence or money-laundering had been made out to warrant an issuance of the impugned o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uilty of the offence of money-laundering only for the reason that he is in possession of some property. This is so because the definition of proceeds of crime also includes the value of any property derived or obtained as a result of criminal activity relating to a scheduled crime. Further any such property - even in the hands of a person not accused of the scheduled crime or offense of money-laundering - would also be subject to the proceedings under the Act. Thus, practically, a person guilty of a scheduled offence who has acquired any benefit in relation to the scheduled offence would in effect also be guilty of the offence of money-laundering immediately on the Act coming into force. If such an interpretation is sought to be provided, the grievance of the petitioner that a penal provision is sought to be given a retrospective operation would be justified and this would clearly offend Article 20(1) of the Constitution of India as an offender of a scheduled crime would now be visited with a greater punitive measure than as could be inflicted at the time when the scheduled offence was committed. Given the wide definition of proceeds of crime it would be contended that irres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eds of crime including concealment, possession, acquisition or use and projecting or claiming it as untainted property . The words concealment, possession, acquisition or use must be read in the context of the process or activity of money-laundering and this is over once the money is laundered and integrated into the economy. Thus, a person concealing or coming into possession or bringing proceeds of crime to use would have committed the offence of money-laundering when he came into possession or concealed or used the proceeds of crime. For any offence of money-laundering to be alleged, such acts must have been done after the Act was brought in force. The proceeds of crime which had come into possession and projected and claimed as untainted prior to the Act coming into force, would be outside the sweep of the Act. 34. In the circumstances, it cannot be readily accepted that any offence of money-laundering had been committed after the Act coming into force. This Act cannot be read as to empower the authorities to initiate proceedings in respect of money-laundering offences done prior to 01.07.2005 or prior to the related crime being included as a scheduled offence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d decision is extracted below:- 8. ..On a careful consideration of the respective articles, one is struck by the marked difference in language used in the Indian and American Constitutions. Sections 9(3) and 10 of Article 1 of the American Constitution merely say that No ex post facto law shall be passed ... and No State shall pass ex post facto law ... But in article 20 of the Indian Constitution the language used is in much wider terms, and what is prohibited is the conviction of a person or his subjection to a penalty under ex post facto laws. The prohibition under the article is not confined to the passing or the validity of the law, but extends to the conviction or the sentence and is based on its character as an ex post facto law. The fullest effect must therefore be given to the actual words used in the article. Nor does such a construction of Article 20 result in giving retrospective operation to the fundamental right thereby recognised. 37. In that case the, the first and the second appellants before the Supreme Court were Minister of Industries and the Secretary to the Government, Commerce and Industries Department respectively of the then United State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reto. In the context of the trial itself having been conducted under a procedure which was different from the procedure as was prevalent at the time of commission of the alleged offences, the Supreme Court observed that: what is prohibited under Article 20 is only conviction or sentence under an ex post facto law and not the trial thereof. Such trial under a procedure different from what obtained at the time of the commission of the offence or by a court different from that which had competence at the time cannot ipso facto be held to be unconstitutional. A person accused of the commission of an offence has no fundamental right to trial by a particular court or by a particular procedure, except insofar as any constitutional objection by way of discrimination or the violation of any other fundamental right may be involved. 39. The Supreme Court next considered the States s contention that since Vindhya Pradesh Ordinance 48 of 1949 - though enacted on 11th September, 1949 - was made retrospective from 09th August, 1948, the offences for which the appellants were charged were offences under the said ordinance. Thus, the convictions could not be stated to be in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the concerned officer has reason to believe, on the basis of material in his possession, that (i) any person is in possession of any proceeds of crime; and (ii) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under Chapter III of the Act. In addition, the concerned officer records the reasons in writing. 42. In the present case, the respondent could not point out any material to counter the petitioner s contention that there was no material on record, which could possibly lead to a belief that the petitioner is likely to transfer or conceal the property in any manner. As indicated earlier, the concerned officer must have a reason to believe on the basis of material in his possession that the property sought to be attached is likely to be concealed, transferred or dealt with in a manner which may result in frustrating any proceedings for confiscation of their property under the Act. 43. The expression reason to believe has been defined under Section 26 of the Indian Penal Code as under:- 26. Reason to believe . A person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there should be a live link or close nexus between the material before the Income Tax Officer and the formation of his belief that the income had escaped assessment. 46. In the present case, there is no material that could suggest that the property sought to be attached was likely to be dealt with in a manner which would frustrate the confiscation of the property under the Act. 47. In Calcutta Discount Company v. Income Tax Officer: 1961 SCR (2) 241, the Supreme Court held as under:- The expression reason to believe postulates belief and the existence of reasons for that belief. The belief must be held in good faith: it cannot be merely a pretence. The expression does not mean a purely subjective satisfaction of the Income Tax Officer: the forum of decision as to the existence of reasons and the belief is not in the mind of the Income Tax Officer. If it be asserted that the Income Tax Officer had reason to believe that income had been under assessed by reason of failure to disclose fully and truly the facts material for assessment, the existence of the belief and the reasons for the belief, but not the sufficiency of the reasons, will be justiciable. The expre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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